SEBI to tighten guidelines for utilisation of IPO proceeds

Mumbai, December 28

Markets watchdog SEBI on Tuesday decided to tighten norms for utilisation of IPO proceeds by companies, introduce special situation funds to invest only in stressed assets and amend various regulations, including those on mutual funds and settlement proceedings.

The Board of SEBI, which met on Tuesday, also gave its nod for amending Foreign Portfolio Investor (FPI) regulations and introducing a provision for appointment or re-appointment of any person, including as a Managing Director or a Whole Time Director or a Manager, who was earlier rejected by the shareholders at a general meeting.

Once the amended norms are in place, such appointments or re-appointments can only be done with the prior approval of the shareholders.

Amid a flurry of Initial Public Offers (IPOs) hitting the market this year and many more expected in 2022, the watchdog has decided to tighten the norms, including restricting the quantum of issue proceeds a company can use for unidentified inorganic growth.

Amendments will also be effected to cap the number of shares that can be offered by selling shareholders and to increase the lock-in period for shares subscribed by anchor investors.

SEBI Chairperson Ajay Tyagi asserted the regulator has no intention to control the prices of IPOs in any manner. “Price discovery is a function of the market and that is how it works globally as well,” he said at a media briefing after the Board meeting.

In a raft of measures, the regulator approved the introduction of Special Situation Funds (SSFs) that will invest only in stressed assets.

These funds will also invest in security receipts issued by Asset Reconstruction Companies (ARCs), securities of companies in distress and any other “asset/security as may be prescribed by the Board from time to time”.

In a move to further safeguard the interest of mutual fund investors, SEBI has decided to mandate trustees of mutual funds to obtain the consent of unit holders when the majority of trustees decide to wind up a scheme. — PTI

Major decisions taken

• Amendments will also be effected to cap the number of shares that can be offered and to increase the lock-in period for shares subscribed by anchor investors
• Special Situation Funds will be introduced that will invest only in stressed assets
• Trustees of mutual funds will be required to obtain the consent of unit holders before winding up a scheme

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